Kroger, private equity firm join forces to invest in emerging CPG brands

Dive Brief:

Kroger has partnered with private equity firm MidOcean Partners to form an investment company focused on exposing emerging CPG brands to consumers, the grocery chain announced Thursday.
The retailer is participating in the new venture, known as MPearlRock, through PearlRock Partners, a consumer product investment company in which Kroger has a stake through its 84.51° retail analytics division.
MPearlRock is intended to fuse Kroger’s retail expertise and distribution capabilities with MidOcean’s experience in injecting capital into consumer brands.

Dive Insight:

Kroger’s involvement in MPearlRock stems from its effort to augment its core grocery store business by developing alternative profit streams.

The newly created company, which Kroger and MidOcean described as a “strategic collaboration,” will support companies in the food and beverage sector and related categories that have revenue in the range of $50 million to $150 million and earnings before interest, taxes, depreciation and amortization of at least $1 million, according to MPearlRock’s website. MPearlRock indicated that it is interested in establishing a controlling or active minority stake in companies it invests in.

MPearlRock intends to take advantage of retail data science and insights to help companies in its portfolio build and position their products. The company also plans to support CPGs in handling aspects of their businesses including in-store testing, manufacturing and bulk procurement, supply chains and employee recruitment, according to the press release.

MPearlRock has appointed Brian Kelley, a veteran CPG executive, to serve as CEO. Kelley served as CEO of beverage company Keurig Green Mountain from 2012 to 2016 after spending more than five years as president of Coca-Cola Refreshments, according to his LinkedIn profile.

From 2017 to 2020, Kelley was a partner at Lindsay Goldberg, the private investment firm Kroger worked with in 2019 to establish PearlRock, which the companies described as a data-driven investment company that would “identify, invest in and help grow the next generation of leading consumer product brands.”

PearlRock currently describes itself as a joint venture between 84.51° and private family investment firm Fremont Macanta, according to its website. The company also notes that its “investment in a brand does not include an expectation of exclusivity to Kroger from portfolio companies.”

MidOcean Partners, created in 2003 through a management buyout of Deutsche Bank’s private equity business, has invested in food companies including Casper’s Ice Cream, Florida Food Products and Louisiana Fish Fry.